The risk for employers in bypassing collective bargaining

16 March 2017

Where an employer has recognised a trade union for collective bargaining purposes, can it still put an offer directly to its employees? This was the thorny issue for consideration in a recent Employment Tribunal decision.

The case concerned pay negotiations between Kostal UK Ltd and its recognised trade union, Unite. A consultative ballot on the proposed pay deal was held, in which employees rejected the offer their employer had put forward. Kostal decided that, in order to overcome this perceived impasse, it would offer the pay deal directly to the employees. It warned that a failure to accept the offer would mean losing out on a Christmas bonus and a pay rise for the year.

The Employment Tribunal found that the result of Kostal’s action was to bypass the collective bargaining arrangement. The difficulty, as the company discovered, is that to go directly to employees in this way may result in a substantial financial penalty. Section 145B of the Trade Union and Labour Relations (Consolidation) Act 1992 sets out what an employer can (and more importantly cannot) do when it has signed up to collective bargaining arrangements with a trade union.

The purpose of s.145B is to prevent employers from undermining the principle of collective bargaining. If an offer is made to employees that leads to terms and conditions no longer being determined by collective bargaining negotiations - referred to as the “prohibited result” - this will be a breach of s.145B. The penalty for this is currently £3,830 per affected employee.

Can an employer call time?

This raises the question of whether it can be possible for any employer, who has entered into a collective bargaining arrangement with a trade union, to offer terms and conditions directly to employees when there is a breakdown in the negotiation process.

In our view, if an employer has exhausted the bargaining process set out in the collective agreement, then to offer the terms directly to the employees does not undermine collective bargaining. In this situation, the union either accepts or rejects the final proposition put forward by the employer and thereby concludes the collective bargaining process. The employer is not indicating an intention no longer to bargain with the union in the future. Its position is simply that the discussions in relation to these particular terms have come to an end.

Each case will, of course, be determined on its specific facts - in particular, the exact wording of the collective bargaining arrangements. Nonetheless, the Kostal case highlights how recognised trade unions are likely to regard direct approaches to employees of this kind as bypassing the established collective bargaining arrangements.

Claims under s.145B are becoming increasingly common. It is therefore crucial for employers to ensure that the collective bargaining process has been fully exhausted before making any direct offers – and also that they can demonstrate sound business reasons for introducing the changes in question. In the Kostal case, it was the company’s failure fully to exhaust the internal processes before making the offers that ultimately led to its downfall.

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